The positive effects of the first large scale wind farm in rural South Africa

Republic of South Africa

Environment & Infrastructure Business Unit

Electric Power & Energy

Environment

February 2014

Aoi Nakamizo
Corporate Communications Department

For 8 years after joining the company, Aoi was involved in exporting steel materials to the global energy market. In October 2012 she changed to the Corporate Communications Dept. and is now broadening her knowledge about the company as a whole. Her passion for traveling took her to 15 countries while in university, but joining a trading company made her want to "travel to locations I would only go to through the job", and has been successful; past business trip destinations include Azerbaijan, Sakhalin (Russia), Madagascar, and South Africa, among others. Someday, when she is old, she dreams of a round-the-world trip visiting all the friends she made along the way. In the photo she holds a model wind turbine, made from beads, which she received as a gift during her visit.

A flourishing business amidst high unemployment

We are in a charming new café called Roxy's, in the town of Molteno, in East Cape Province, South Africa, interviewing a local resident. "I used to have just one taxi," says Mr. Habana. "The people around here are mostly farmers, and there wasn't so much demand. But now, I've hired some new drivers, and I added two 15-seater mini-buses in my fleet, to transport the contractors building the new wind farm. Business is good."

Mr. Habana is 35, recently married and father of a baby daughter. Molteno, where he was born and raised, was a booming coal-town in the 1940's. But after the coal mine ran its course, a replacement industry did not arise. Now, according to some statistics, the town's unemployment rate is said to be up to 90 percent, and most of the people depend on state welfare to survive. But new venues like Roxy's, and success stories such as Mr. Habana's are slowly but surely increasing since 2011, when the Dorper Wind Farm owners held the first community meeting to explain the new plans in the outskirts of their town.

Opened in 2013, Roxy's café has become a favorite hang-out for locals

The current affairs of electricity in South Africa

The African continent has been called the "last frontier", and many countries list insufficient electricity supply as one of the top reasons for the delay in economic development. Even in South Africa, where at one point was said to have the cheapest electricity in the world due to its massive coal reserves, the construction of new power plants cannot catch up to the rapid economic growth, and power cuts often interrupt daily lives. Under such circumstances, the government has named wind, solar, and other forms of renewable energy as a pillar of growth for the country's energy supply. But such forms of renewable energy are commonly considered to be major players in developed countries, to replace conventional thermal power plants, as a way to reduce greenhouse gasses and use the world's resources more effectively. Can renewable energy be the savior of South Africa's energy problems?

Apparently, the government seems to think so. 85% of the country's energy has been derived from coal, but in August 2011, the South African Department of Energy introduced an aggressive plan called REIPPPP, or the Renewable Energy Independent Power Producer Procurement Program, to newly establish 3,725MW of renewable energy capacity by 2014. This would help to diversify the country's energy sources, and the resulting reduction of domestic coal consumption may free a larger amount for export, to create much needed foreign revenue. This would also help to reduce the country's carbon footprint in the process.

Location of Sumitomo Corporation's Dorper Wind Farm

The birth of Dorper Wind Farm

On learning that such a program was in the pipeline, Sumitomo Corporation, which regards renewable energy as one of its core business areas, teamed up to make a bid with South African partner, Rainmaker Energy, for a 100-megawatt onshore wind farm in Eastern Cape Province. In December 2011, the team was selected as a preferred bidder and began negotiations in earnest to build 40 2.5-megawatt wind turbines, in what was, at the time, nothing more than a large field where sheep and cattle grazed. The sheep, an indigenous breed with a distinct black face and neck called "Dorper", became the project's namesake and logo. The determined team successfully negotiated their way to signing an electricity supply contract with the state-run utility company, ESKOM, in November 2011.

I visited the construction site in October 2013, almost a year since the contract signing and 8 months after the first sod had been turned. That day, the blades on the 18th wind turbine were being attached to the tower. Since this was one of the first large scale wind farms in the country, everything had to be imported, including the cranes to be used for building the turbines! Although it was a prime site due to its strong wind conditions, just then, when the towers were being built, the wind became a hindrance; the cranes could not be used if the wind was too strong, so it had to be carefully monitored and construction was often interrupted. What would be a 30 minute job in windless conditions, one blade attachment took over 2 hours that day.

The logo mark for the Dorper Wind Farm

A rare shot of a wind turbine as it is being built

Even so, one of the benefits of renewable energy is that construction time is relatively short. Compared to a large scale coal- or gas-fired power plant, which can take 3-4 years until completion, wind and solar power plants rarely take over 2 years, depending on capacity. Once a wind turbine is built, it can immediately start using the elements to produce energy to feed into the grid.

A completed wind turbine and grazing dorper sheep

High expectations for the future

One distinctive feature of South Africa's REIPPPP is that it is obligatory for bidders to include a plan for Black Economic Empowerment, or BEE, in the business offer. The government launched the BEE program to give economic privileges to groups who were previously disadvantaged during the Apartheid era.

The Dorper project is dedicated to this cause, as it is in line with an important credo in the business philosophy of Sumitomo Corporation; "benefit for self and others, private and public interests are one and the same." In addition to being beneficial for Sumitomo, who owns 60% of the project, the business must also be beneficial to the society in which it operates.
Specifically, 25% share of the Dorper wind farm is owned by BEE holding companies, which are backed by trusts for the local communities such as Molteno. Further, there is another rule that 2.1% of the wind farm's profits must be used for local economic development. Mr. Taizo Hayakawa, a Sumitomo expatriate stationed in Johannesburg, has one idea in mind. "In this area, chicken meat, which is most popular with the local people, is more expensive than other areas. If the people here can learn to raise tasty chicken economically, and to manage the business... I see it as a potential locally-run business opportunity."

The Dorper Wind Farm, scheduled to begin operations in the summer of 2014, is a truly international undertaking. Based on a South African government policy, a Japanese trading company and South African partner are utilizing the latest German wind turbines to provide much-needed power, in one of the poorest provinces in the country. Meanwhile, the basic principle of this enterprise is in line with the vision of late former President Nelson Mandela; to provide equal economic opportunity to all. This project comes with the hope that Molteno may once again be filled with activity, and that it will grow into a bustling community as it once was.

The statue of the former president in the Nelson Mandela Square, home to the Sumitomo Johannesburg office